Game consoles— like today’s Xbox 360, Nintendo Wii, and PlayStation 3—have come a long way from their humble beginnings, when a white dot bounced back and forth somewhat forlornly across an oscilloscope screen. Today’s video and computer games include graphically impressive first-person shooters such as Crysis 2 and Call of Duty: Black Ops. Others, like Dance Central on Microsoft’s Xbox 360 with Kinect, apply real-time motion-capture technology to turn the player’s body into the controller. [Check out a slideshow of video games and consoles over the years.]

To explore the game industry’s dramatic history, The Institute enlisted the help of the IEEE History Center, IGN.com, and other online resources. The story is filled with flops as well as breakthroughs. Somehow, the game industry always bounces back and continues to grow.

EARLY PIONEERS The first video game can be traced to 1948, when Thomas T. Goldsmith Jr. and Estle Ray Mann were issued a U.S. patent for a “cathode­ ray tube amusement device.” A machine with a knob (for aiming) and button (for shooting) was used to fire at airplane targets. Because of equipment costs, among other factors, the game was never manufactured; only a few handmade prototypes were passed around.

Ten years later, physicist William Higinbotham developed Tennis for Two, a game that added an analog computer to an oscilloscope. The opposing players each had a box equipped with a knob that controlled an on-screen paddle for angling where a ball was to go, and a button for hitting the ball.

In 1961, a group of MIT students wrote a program for their DEC PDP-1­­ computer, called Spacewar! It was for two players whose squadrons of opposing spacecraft fired missiles at each other. If yours was the last craft firing, you won. The game, eventually distributed as a premium with new DEC computers, was simple and fun to play.

ARCADES, ATARI, PONG In the early 1970s, coin-operated video arcade games began popping up, including a version of Spacewar! called Computer Space, developed by engineers and entrepreneurs Nolan Bushnell and Ted Dabney, who went on to found Atari in 1972. The company had just one other engineer, IEEE Life Member Alan Alcorn, and a modest lab.

“It was an eye-opener to see that you could start a company with such simple stuff,” he says.

Bushnell asked Alcorn to develop an arcade version of a Ping-Pong game after seeing a demonstration of a tennis game on the Magnavox Odyssey, the first home video-game console. The result—Pong—was released in 1972, and its popularity helped launch the modern video-game industry.

“Nothing like this had ever been done before,” Alcorn wrote. “There were two knobs and a coin box.” Pong—a table tennis game, with each knob controlling a “paddle”—became the first commercially successful video game.

Atari released a home version in 1975. Its success led many other companies to release clones. Eventually, there were so many copies—and lots of bad ones—that they led to the crash of the video-game industry in 1977. When consumers balked at buying the junk, most of the Pong-clone companies went bust.

The late 1970s and early ’80s was a great time for arcades, however. By 1981, arcade games—which had expanded to include Battlezone, in which players destroy tanks drawn in green lines on a black screen, and the popular alien-shooting Space Invaders—were pulling in about US $5 billion each year in North America alone. Color arcade games soon began appearing, like the smash hit Pac-Man, which featured a yellow face gobbling pellets while avoiding ghosts.

CONSOLES AND COMPUTERS Credit for the first home video-game console goes to Ralph Baer, who came up with the idea in the 1950s while working on TV equipment at Loral Electronics, in New York City. But Loral, a defense contractor, wasn’t interested in a game, so it wasn’t until 1968 that Baer and his colleagues at Sanders Associates, in Nashua, N.H., finished a prototype called Brown Box. It ran games off printed-circuit-board cartridges that controlled switches to alter the circuit logic. The system, which was soundless, included clear plastic overlay sheets that could be taped to the player’s TV screen to add color, playing fields, and other graphics.

The system was licensed to TV set maker Magnavox, which named it the Odyssey, and the company began selling it in 1972 in the United States. Some 100 000 units were sold the first year. The Odyssey’s offerings included football, a shooting game, and a table tennis game predating Pong. Magnavox later sued Atari for patent infringement, saying Pong was a copy of Odyssey’s table tennis game. The case was settled out of court.

Computer games became popular during the 1970s, many of them developed by college students using their schools’ mainframes on the sly. One of the most popular was Star Trek, a spin-off of the TV show in which users typed commands to control the USS Enterprise on a mission to destroy Klingon warships. There was also an early first-person shooter game called Maze War and a slew of digital clones of the popular tabletop role-playing game Dungeons and Dragons. Computer-game sales continued to grow in the late ’70s and early ’80s as more people bought home computers such as the 8-bit Commodore 64.

SECOND-GEN CONSOLES Fairchild Semiconductor in 1976 released its Video Entertainment System, later named the Fairchild Channel F. It was a breakthrough in home consoles because it was the first to use ROM cartridges, which made it possible to pause games. The Channel F’s controller was a simple joystick, and the system boasted 26 games it called videocarts, including bowling, baseball, and racing.

In 1977, Atari released its Video Computer System (VCS), later named the Atari 2600. The system came with one of two titles: Combat, which featured 27 war games, or Pac-Man. The 2600 employed two joysticks and a pair of conjoined paddle controllers.

Another successful console was the Intellivision, made by Mattel in 1980; it launched with poker and blackjack games. Coleco Industries’ ColecoVision, released in 1982, came packaged with Donkey Kong, licensed from Nintendo. Donkey Kong was an early version of what’s known as a platform game, in which characters jump onto ledges, dodging enemies and obstacles. In Donkey Kong, the goal was to rescue a damsel in distress who was held by a giant ape.

But poor-quality games soon flooded the market. Among them was E.T. the Extra-Terrestrial, released in 1982 by Atari. Players guided the movie alien to find three pieces of an interplanetary telephone to call home. At the end, each time the player got E.T. aboard his spaceship, the game would restart. Basically, the game would end only if E.T.’s energy bar was depleted or the player quit. Partly as a result of the bad-games glut, an industry meltdown in 1983 pushed Coleco, Magnavox, and other companies out of the game business.

MARIO TO THE RESCUE The industry made a comeback in 1985 thanks to the release of the Nintendo Entertainment System (NES). The 8-bit console came with the breakout hit platform game Super Mario Bros., and the mustachioed, red and blue overall–­wearing plumber soon became a household name. Nintendo dominated the industry in North America and Japan until the next generation of consoles came along in the 1990s. Helping keep Nintendo at the top was the agreement of the company’s third-party game developers to produce games only for the NES. Sega launched a competitor, its Master System, in 1985 in Japan, then in North America in 1986, and in Europe a year later.

These third-generation consoles featured two controllers that had a directional pad for moving characters, known as a D-pad, and at least two action buttons. They replaced the joysticks and paddles used earlier, becoming the foundation for future controllers.

Nintendo released the blockbuster Legend of Zelda in 1986. The action-adventure, puzzle-solving game featured a hero named Link on a quest to save the princess Zelda. Its popularity led to a long series of Zelda games that continue to be released today. Another hit was Final Fantasy, which also resulted in a continuing series that made it the most successful role-playing game franchise in history.

MORE AND MORE BITS The 1990s were important for the industry. Handheld systems like Nintendo’s Game Boy, released in 1989, became increasingly popular, and a plethora of more advanced consoles hit the market.

Sega released its next-­generation 16-bit Mega Drive in Japan in 1988. It debuted in North America a year later, under the name Sega Genesis. The system became Sega’s most successful. In 1991, the company released one of its biggest hits, Sonic the Hedgehog. Sega also released Mortal Kombat, a fighting game that raised eyebrows for its graphic, bloody battles.

That year Nintendo launched its 16-bit Super Nintendo, called the Super Famicom in Asia. It became the best seller of the 16-bit console era, with hits such as Super Mario World, The Legend of Zelda: A Link to the Past, and Street Fighter 2. Many other systems were introduced during the next few years, including the Neo-Geo, which featured advanced 2-D graphics, and Atari’s last console, the Jaguar.

Soon, 32-bit fifth-generation consoles hit the market. In 1994 in Japan, three were released: the Sega Saturn, the Sony Play­Station, and the NEC PC-FX. The PlayStation had started out as a joint project with Nintendo to create a CD-ROM add-on to the Super Nintendo, but before it was announced Nintendo changed its mind and pulled out over contract concerns. Sony had no reason to cry over the split, though: The PlayStation went on to outsell all of its fifth-generation competitors. Several popular titles launched with the console, including Doom, a first-person shooter hailed for its 3-D graphics.

Nintendo released the 64-bit Nintendo 64 in 1996, but it failed to live up to expectations. The system used ROM cartridges, unlike PlayStation’s CD format, which limited its storage capacity. Nintendo soon lost its leading position in the industry.

Still, the Nintendo 64 introduced influential games such as Super Mario 64, whose 3-D platform style became an industry standard. Nintendo also released the first major first-person shooter exclusive to a console, the James Bond hit GoldenEye 007. And The Legend of Zelda: Ocarina of Time, released in 1998, is widely credited as one of the best games of all time.

ENTER MICROSOFT Sixth-generation consoles hit the market in 1998 as well, starting with Sega’s Dreamcast, the first console to have a built-in modem for online play. Fighting games such as Soul Caliber showcased the system’s impressive graphics, but the Dreamcast was Sega’s last game console.

Sony released the PlayStation 2 in 2000, and the console became the all-time best seller, with 150 million units sold as of February 2011. Despite coming out with the PS3, Sony continues to make games for the PS2.

Nintendo’s GameCube, the company’s first disk-based system, came out in 2001. It didn’t do as well as the company had expected. A contributing factor was a newcomer to the market: Microsoft. In 2001, the company released the Xbox and the sci-fi first-person shooter Halo: Combat Evolved. The game helped Xbox sales skyrocket, and the Halo series would come to define the first-­person shooter genre.

During the past few years, the companies known as gaming’s Big Three—Microsoft, Nintendo, and Sony—have all made major advances. Nintendo released an upgrade in 2004 of its popular Game Boy handheld, the DS. Sony launched a rival, the PlayStation Portable (PSP), in Japan that same year and one year later in the United States. Both companies continue to release upgrades. Nintendo’s most recent, the 3DS, features a glasses-free 3-D screen. Sony is set to release its PSP successor, the PlayStation Vita, this month in Japan and early next year elsewhere.

As for Microsoft, its Xbox 360 was launched in 2005 with high-definition graphics, large hard disk–based secondary storage, online play, and the ability to download games. Sony’s PS3, released in 2006, was also outfitted with those features. Nintendo, rather than focusing on better graphics and processing power, opted for something else entirely. Players using its Wii, released in 2006, control characters merely by waving their controller at a sensor placed near the screen. The console quickly sold millions and Nintendo returned to its No. 1 spot in the console wars.

Last year, Microsoft tried its hand at motion control with its Kinect add-on to the Xbox 360. Using groundbreaking real-time motion tracking, the system scans players’ bodies, replicating their moves in a character on the screen. The Kinect broke the Guinness world record as the fastest-selling consumer electronics device, with more than 8 million systems sold in its first 60 days. Meanwhile, Sony released a motion controller for its PS3, called the Move.

The Big Three continue to work on their next-generation consoles. Nintendo’s upcoming Wii U is supposed to have better graphics and greater processing power as well as a motion controller with a touch screen. What will the future of games bring? Stay tuned. For the video-game industry, it’s far from “Game Over.”